Credit cards have become part and parcel of our daily lives. Today, it’s common for banks to issue a credit card as soon as you open a salary account. The conveniences and benefits offered by a credit card make it an indispensable part of our financial lives.
While getting a credit card has become easier than ever before, getting one with a high credit limit remains one of the biggest challenges facing cardholders today. As you would know, the credit limit is the maximum amount that you can spend on your card. You cannot make purchases over the credit limit until you have settled your balances.
To illustrate this point with an example, let’s say you have a credit card with a limit of Rs. 50,000. Then, it’s not possible to purchase an iPhone costing Rs. 1 lakh on the card, as your limit is lower than the cost of the phone. Thus, the credit limit acts as a brake on your purchasing power.
How is the credit limit fixed for my card?
The credit limit depends on several factors and varies from card to card and individual to individual. For example, you and your friend may have the same credit card type from the same issuer. But, your friend may have a limit of Rs. 80,000 on it, while your limit may be fixed at Rs. 50,000.
The bank/card issuer fixes the limit based on the ability of the individual to pay. The key factors that determine card limits are:
- The income of the applicant
- Credit score and credit history of the applicant
- Other debts/credit cards held
The limit on your card is communicated to you during the card issue. You can also find the credit limit on your monthly card statements.
Can I increase the limit on my credit card?
Yes, it’s possible to increase the limit on a card. If you have been paying your card bills regularly and using it responsibly without maxing out the limit, then your bank/card issuer is likely to increase credit limits.
If you’re eligible and your bank is willing to increase the limit on your card, it’s always a good idea to go for it. Having a higher credit limit is beneficial in two ways:
- It increases your purchasing power. Having a high credit limit helps you splurge on luxurious expenses and meet emergency needs.
- Furthermore, a higher credit limit is beneficial for your credit score. It lowers your credit utilisation ratio (provided you don’t max out on the new limit), which improves your credit score.
Now, the big question here is, “how can I increase the limit on my credit card?”
Smart Tips to Increase Credit Card Limits
#1: Apply for a New Credit Card
The easiest way to increase your overall credit limit is to apply for a new card. When you apply for a new card, it automatically increases your overall credit limit. Let’s say you have a credit card with a limit of Rs. 30,000. When you apply for a new card with a limit of Rs. 40,000, it effectively increases your overall credit limit to Rs. 70,000.
While choosing a new card, make sure to check the features and benefits offered on it. Look for a card that matches your lifestyle needs. If you have been managing your current card well, by paying dues on time and avoiding maxing it out, then you’re likely to be approved for a new card with a higher credit limit and better benefits. You can use both these cards to enjoy a higher standard of living.
Insider Tip: While applying for a new credit card, don’t make the mistake of closing your old credit card. Doing so reduces the average length of your credit history and brings down the overall available credit limit, which in turn, hurts your credit score.
#2: Request your Bank to Increase the Limit on your Existing Card
You can ask the credit card team of your bank to increase the available limit on your card. Depending on various factors like your credit score, credit history, income and other debts, your bank may or may not honour your request.
Insider Tip: Several banks offer an automatic increase in credit limits annually for cardholders who pay their credit card bills on time. You can check if you’re eligible for this online or by connecting with your bank’s credit card team. It’s a good idea to accept the annual credit card limit increase even if you don’t need it. After all, we never know when a higher credit limit might come in handy, especially during emergencies.
#3: Provide Proof of Increased Income
You may have received a promotion at work or earned a bonus. It’s highly possible that your bank is not aware of the changes in your financial status. Provide proof of your income increase to the bank (like submitting a copy of the latest salary slip, etc.). You can then ask your bank to increase your card’s credit limit to match your latest pay slab.
#4: Work on Improving your Credit Score
Having a high credit score is beneficial in several ways. It not only makes it easy to secure loans but also gives you leverage while applying for a credit card. Having a good credit score or CIBIL™ Score shows that you’re responsible with credit, improving your creditworthiness in the lender’s eyes. This puts you in a favourable position, and the bank/credit card company is likely to grant your request for an increase in the card limit.
Monitor your credit score regularly. You can check your credit score for free on trusted sites like CreditMantri. If your credit score or CIBIL™ score is low, here are a few suggestions to improve your credit score and get it on the right track:
- Pay all your dues like credit card bills, loan EMIs on time
- Reduce your overall debts
- Maintain a mix of credits both secured and unsecured
- Avoid maxing out your credit card limit
#5: Reduce your Overall Debt Obligations
When you apply for a credit card limit increase, the bank or credit card company will consider your overall debts. If you have multiple ongoing debts like home loans, personal loans and other credit card bills, then your request for a limit enhancement will not be approved despite having a high income. So, it pays to bring down your other debt obligations before applying for a credit limit increase.
#6: Demonstrate your Ability to Repay Dues on Time
To convince your bank/credit card company that you can handle higher credit limits responsibly, you need to show them proof that you are good with credit. If you have any pending credit card dues or loan EMIs, make sure to clear them first before applying for a credit limit increase. Having a track record of paying credit card bills on time and in full can work in your favour.
#7: Go for a Secured Credit Card
If none of the tips suggested above work for you, you could apply for a secured credit card. A secured credit card is disbursed based on the value of the collateral you offer. Generally, secured credit cards require the applicant to pledge a fixed deposit with the bank. The sanctioned credit limit will be around 80% – 90% of the fixed deposit value.
So, if you’re looking to increase the credit limit available on the card, but you don’t have proof of income to validate your request, you can opt for secured credit cards.
Getting a credit limit increase on your card feels good. It’s a validation that you’ve been responsible with credit. Having a high credit limit is not just about increasing your purchasing power. It can come in handy during financial emergencies like home repairs, hospitalisation, etc. Furthermore, a high credit limit brings down your overall credit utilisation rate (provided you don’t go on a shopping spree), increasing your credit score. Make use of the tips listed here to increase the limit available on your card.